Background Checks: What About Staffing Agencies?

We’ve referenced articles and written often in this space about the importance of background checks. Any company that doesn’t screen new hires, as well as existing staffers, is playing a risky game. There is another angle to this problem, however. Many companies use staffing agencies (sometimes called “temp agencies”) to fill their employment needs. This can be on a seasonal, part-time or even a full-time basis.

In these cases, the employees technically work for the staffing agency, who contract their labor to the company that uses their services. For this reason, the company using a staffing agency might forego any hiring process whatsoever, including the use of background checks.

This can lead to trouble. According to an article in the Washington Post, the U.S. Dept. of Labor has warned clients of staffing agencies that they need to take responsibility for the workers they hire – even those they hire indirectly. It’s a critical distinction because it means that companies are liable for the actions of those employees, despite their possible assumption that the staffing agency should carry that liability.

As noted in “Department of Labor sends warning shot to clients of temp staffing agencies:”

Subcontracting, outsourcing, and the use of staffing agencies allows businesses to inexpensively scale up and scale down their labor needs, without the extra hassle and liability of adding payroll. But it also adds another layer between workers and the bosses who call the shots, shielding managers from responsibility when the labor provider doesn’t follow the law.
Department of Labor’ Wage and Hour Division director David Weil, a former business school professor, calls this trend “fissuring.” He thinks lots of those client companies should really be considered “joint employers,” together with the contractors that sign the checks, making them liable for violations. And Wednesday, his department issued detailed guidance drawing the categories in black and white, sending a message to employers that they had better fall on the right side.

The concept of making companies and their staffing agencies joint employers would set an important legal standard. For one, it would provide more protections for workers and their wages, as the article describes. But it also has serious implications in the fight against fraud. If, for example, a temporary employee commits fraud by stealing from a customer’s account, for example, the company cannot hide behind the third-party staffing agency in an effort to dodge liability. The company’s own hiring processes and anti-fraud controls must be examined and every effort must be taken to avoid placing bad actors in positions of opportunity where they might commit fraud.

For this reason, companies that using staffing agencies must take the following steps:

  • Re-evaluate every position that is currently staffed through an agency, and consider whether it can be better staffed directly.
  • Rigorously examine any staffing agencies being used, and review their hiring and screening processes.
  • Maintain a robust hiring policy and employee code of conduct. Even when staffing through a third-party, a policy for new employees should be in place and closely followed.
  • Implement background screening on all employees, including direct and indirect hires. This should include criminal background and credit checks (as applicable by law).

Smart business owners know that screening isn’t only performed when hiring new employees. It should also be applied to current employees at various intervals. With this in mind, every company should have its own screening process in place, rather than simply leaving it to a staffing agency in blind faith that their own processes are rigorous and thorough enough to prevent fraud.

Consider this information from the Dept. of Labor to be fair warning. Companies are responsible for their employees, whether hired in-house or through another party. The best way to avoid problems is to be proactive in preventing fraudsters from infiltrating your work force.